Part 1:- AIS ASSIGNMENT FOR (4th year)

1. What are the basic functions and components of an accounting system?

a. Basic functions of an accounting system:-
Collecting and processing information: In this phase, an accounting
information system accumulates data from cash sales and cash purchases.
Receivables, payables, payroll, invoices, and more. The computerized system
processes all data of debits and credits and converts them into meaningful
pieces of information. 
Generate reports for management: People from management such as sales
managers, production managers, financial analysts, and other heads of
departments can make decisions based on the reports generated by AIS. They
can analyze the company’s financial performance and current position. Thus,
they can set attainable business goals aligned with the available resources. 
Interconnect multiple departments: An AIS can create a common
dashboard for multiple departments that are interrelated. For example, the
sales department can upload their sales budget for the inventory team. Then
they can take steps to stock products or purchase materials. Then the
respective department will create invoices. This information will be available
to any department that needs it.
Have control over the circulation of data: An accounting information
system deals with sensitive information of the customers, vendors, suppliers,
and the company itself. We can regulate the level of data circulation with it.
AIS helps business owners define who gets how much access to the
company’s financial data. We will get complete internal control over the data
available across the AIS. 
Detect fraudulent activities: Since an AIS keeps track of all the financial
transactions of a company; you can easily detect any unauthorized and
unnatural flow of money. This allows businesses to investigate any
discrepancy before it is too late. We can save millions of dollars by investing
in a quality accounting information system.
b. Components of an accounting system:-
AIS People: People who use an AIS fall under this point. From C-suite executives
like CFOs to accountants and managers, whoever uses this system is considered
AIS people. For example, higher management set sales targets for the staff, the
relevant department is notified, and then sales person put the sales order to the
AIS so that the information passed to accounting department and create invoices.
Procedures and instructions: The AIS system needs to follow a set of rules
when collecting and processing data.
Source data (documents): Usually, accounting information systems use SQL- to
manage a database. Any information that affects the company’s money matters
should be included in the AIS database. An AIS database generally consists of the
following types of data. 
 Part 1:- AIS ASSIGNMENT FOR (4th year)

o Sales order, inventory, general ledger

o Purchase orders, transaction invoices
o Analytics and reports, Tax information
o Payroll data, timekeeping and more.
I/O devices (Hardware): We need many input and output devices to run an
account information system smoothly. All these devices and the IT infrastructure
must be compatible with the AIS software we will be using. Otherwise, we will
not get a seamless experience while using the AIS for our business. 
o Computers, keyboards, modems/routers, bar code scanners
o Monitors, printers, projectors, mobile devices and backup power supply
Information processors: Once we have all the hardware and devices ready at our
disposal, it is time to integrate software into our system. This software processes
all relevant data and posts them to ledgers, reports, and journals, and makes them
available for use. Decision-makers can analyze the outputs and make decisions
based on that information.
Information storages: The information processor or software does not have
physical storage where it can store the data. It usually depends on a server or
storage devices like hard drives. Make sure that you have secure storage devices
that are easily accessible only to people who have the authority.
Security: Almost all AIS-generated data are confidential information. We must
have internal control over the circulation of these sensitive data.

2. What are the accounting system principles?

Cost Effectiveness: If the accounting information system is cost-effective, it can
provide desired output and if flexible, it can contribute much in achieving the
objective of a person or an organization.
Useful Outputs/ Necessity: Working information must be understandable,
relevant, reliable, timely and accurate. The designer of information system will
always take the necessity and knowledge of accounting information users into
consideration.
Flexibility: In accounting information system there must be provision for
inclusion of changed information needed by different users. This system must be
adequately flexible so that it can meet changed demand.
3. Compare and contrast manual accounting system VS computerized accounting system
by enumerating their advantages and disadvantages.
Manual accounting system is a paper-based accounting system, in which journal
and ledger registers, vouchers, account books are used to store, classify and
analyze financial transactions of an organization. But computerized accounting
system is the accounting system that uses the computer system and pre-packaged,
 Part 1:- AIS ASSIGNMENT FOR (4th year)

customized or tailored accounting software, to keep a record of financial

transactions and generate financial statements, for analysis.
Advantages of manual accounting system:-
o Error correction
o Data system errors and file corruption
o Always accessible
Disadvantages of manual accounting system:
o Time consuming.
o Human error.
o No backup records in case of loss or damage.
o May require specialized knowledge to maintain.
Advantages of computerized accounting system:
o Simplicity
o Reliability
o Cost effectiveness
o Ability to collaborate
Disadvantages of computerized accounting system:
o Potential fraud
o Technical issues
o Incorrect information
Manual Accounting is a system of accounting that uses physical registers and
account books, for keeping financial records. But Computerized Accounting is an
accounting system that uses an accounting software, for recording financial
transactions electronically.
In manual accounting system recording is possible through book of original entry.
But in computerized accounting system data content is recorded in customized
database.
In manual accounting system all the calculation is performed manually. But in
computerized accounting system only data input is required, the calculations are
performed by computer system.
Manual accounting system is slow but computerized system is comparatively
faster.

4. How is data being modeled?

Data modeling is the process of creating a simplified diagram of a software
system and the data elements it contains, using text and symbols to represent the
data and how it flows.
Data models provide a blueprint for designing a new database or reengineering a
legacy application.
 Part 1:- AIS ASSIGNMENT FOR (4th year)

Data is Modeled by using different modeling techniques:

o Hierarchical data modeling
o Network data modeling
o Relational data modeling
o Entity-relationship data modeling
o Dimensional data modeling
o Graph data modeling
o Object- oriented data modeling

The below figure showed data modeling phases.

5. Discuss the different types of normalization:-

Database normalization is the process of restructuring a relational database in accordance
with a series of so-called normal forms in order to reduce data redundancy and improve
data integrity. Database Normalization is a process and it should be carried out for every
database you design. The process of taking a database design, and apply a set of formal
criteria and rules, is called Normal Forms.
Types of Normalization:
First Normal Form (1 NF): The first normal form requires that a table satisfies the
following conditions:
o Rows are not ordered
o Columns are not ordered
o There is duplicated data
 Part 1:- AIS ASSIGNMENT FOR (4th year)

o Row-and-column intersections always have a unique value

o All columns are “regular” with no hidden values
Second Normal Form (2 NF): An entity is in a second normal form if all of its
attributes depend on the whole primary key. So this means that the values in the
different columns have a dependency on the other columns.
o The table must be already in 1 NF and all non-key columns of the tables
must depend on the PRIMARY KEY.
o The partial dependencies are removed and placed in a separate table

Note: Second Normal Form (2 NF) is only ever a problem when we’re using a composite
primary key. That is, a primary key made of two or more columns.

Third Normal Form (3 NF): The third normal form states that you should
eliminate fields in a table that do not depend on the key.

o A Table is already in 2 NF

o Non-Primary key columns shouldn’t depend on the other non-Primary key

columns.

o There is no transitive functional dependency

Note: - Denormalization is a strategy used on a previously-normalized database to increase

performance. In computing, denormalization is the process of trying to improve the read
performance of a database, at the expense of losing some write performance, by adding
redundant copies of data or by grouping data. It is often motivated by performance or scalability
in relational database software needing to carry out very large numbers of read operations.
Denormalization should not be confused with unnormalized form. Databases/tables must first be
normalized to efficiently denormalize them.

Boyce Codd Normal Form or Fourth Normal Form ( BCNF or 4 NF)

Fifth Normal Form (5 NF)
Sixth Normal Form (6 NF)
 Part 1:- AIS ASSIGNMENT FOR (4th year)

6. What are the different conventional and electronic payments?

Conventional means that the loan is not part of a specific government program. It
has two main categories:
o Conforming loan: has maximum loan amounts that are set by the government.
o Non-conforming loan: are less standardized. Eligibility, pricing, and features can
vary widely by lender.
Electronic payment allows customers to pay for goods and services electronically
means without the use of checks or cash. Done via :
o Debit card
o Credit cards or
o Direct bank deposits.
Common methods of electronic payment:
o Credit or debit card payment
o Internet banking
o Direct debit
o E-wallet
o Store Credit Card
7. What is the difference between debit and credit card?
When you use a debit card, the funds for your purchase are taken from
your checking account in almost real time. When you use a credit card, the
amount will be charged to your line of credit, meaning you will pay the bill later,
which also gives you more time to pay.

Credit cards give you access to a line of credit issued by a bank, while debit
cards deduct money directly from your bank account.
Credit cards offer better consumer protections against fraud compared with debit
cards linked to a bank account.
Newer debit cards offer more credit card-like protection, while many credit cards
no longer charge annual fees.
 Part 1:- AIS ASSIGNMENT FOR (4th year)

#Part 2 choice
1. Sending remittance data and payments together electronically is referred to as
A. EDI B. EFT C. FVAN D. FEDI
2. Which of the following is not a control issue associated with electronic commerce?
A. invalid transaction B. unauthorized transactions C. lack of an audit trail D. loss of
confidentiality
3. A network used to implement FEDI is A. the internet B. an FVAN C. an intranet
D. an extranet
4. Which approach to encryption is the most secure for a server that deals with many
unknown clients? A. public key encryption B. secret key encryption C. digital
signature D. none
5. Which of the following is used to store digital cash on a personal computer? A.
electronic digest B. digital signing unit C. virtual cash transporting system
D. none
6. Which of the following statements is true regarding digital signatures? A. they
require the related message to be encrypted
B. they do not require the related message to be encrypted
C. they require the use of message digests D. none